Recce Pharmaceuticals Secures $5.3M R&D Rebate to Fund Phase 3 Trial in Indonesia

Recce Pharmaceuticals (ASX: RCE) has received $5,339,202 in non-dilutive R&D tax rebate funding from the Australian Taxation Office for FY25, with an additional $3.0 million expected pending ATO approval. The Recce Pharmaceuticals R&D Rebate Funding provides critical capital to advance the company’s Phase 3 clinical trial in Indonesia and domestic anti-infective programs without shareholder dilution.

Recce Pharmaceuticals Secures $5.3M R&D Rebate to Accelerate Anti-Infective Development

Recce Pharmaceuticals (ASX: RCE) has secured $5,339,202 in cash from the Australian Government’s R&D Tax Incentive programme, reflecting a 43.5% rebate on eligible research and development activities conducted both domestically and internationally during FY25. The funds, provided without repayment obligations or caveats, directly support the company’s ongoing Phase 3 clinical trial for RECCE® 327 in Indonesia and broader anti-infective pipeline development.

The company has lodged a further R&D Tax Incentive submission covering additional eligible activities. Subject to Australian Taxation Office review and approval, Recce expects to receive approximately $3.0 million in supplementary funding, bringing total FY25 R&D rebates to $8.3 million. This additional capital would complete the company’s FY25 rebate entitlements and provide further non-dilutive financing.

Chief Executive Officer James Graham stated the rebate allocation priorities:

“This substantial rebate will go towards funding our R&D programs, both locally and overseas, including our ongoing Phase 3 Clinical Trial in Indonesia, and further domestic clinical programs. The funds received provide further confidence in our objectives and support the continued progression of Recce’s anti-infective portfolio.”

The $5.3 million received will be allocated across three key areas:

1. Phase 3 Clinical Trial Continuation: Direct funding for the ongoing Indonesia-based trial evaluating RECCE® 327 in serious bacterial infections
2. Domestic Clinical Programs: Support for planned Australian clinical studies across Recce’s three-candidate pipeline
3. Operational R&D Activities: Manufacturing refinement and preclinical research for oral and viral candidates

This capital injection extends Recce’s operational runway without equity dilution, preserving shareholder value while maintaining clinical trial momentum. The non-dilutive nature of R&D rebates makes them particularly valuable for pre-revenue biotechnology companies navigating expensive late-stage development.

How Does the Australian R&D Tax Incentive Benefit Biotech Companies?

The Australian Government’s R&D Tax Incentive programme provides a 43.5% cash refund on eligible research and development expenditure for companies with aggregated turnover below $20 million. Unlike traditional grants or loans, these funds are provided as cash refunds with no repayment requirements, strings attached, or equity dilution.

A critical advantage for companies like Recce Pharmaceuticals is that the rebate applies to R&D activities conducted anywhere in the world, not solely within Australia. This means Recce’s Phase 3 clinical trial expenditure in Indonesia qualifies for the 43.5% rebate, significantly reducing the effective cost of international clinical programmes. For early-stage biotechs conducting trials in jurisdictions with lower costs or specific patient populations, this global coverage creates substantial capital efficiency.

The programme functions as a partial cost recovery mechanism that effectively subsidises nearly half of eligible R&D spending. For a biotech investing $12 million in annual R&D activities, the 43.5% rebate returns approximately $5.2 million in cash, reducing net R&D expenditure to around $6.8 million. This mechanism allows companies to extend clinical development timelines and preserve cash reserves without additional fundraising.

Key benefits for biotechnology companies include:

• Cash refund structure: Direct payment rather than tax credit offset
• No dilution: Preserves existing shareholder equity percentages
• Global R&D coverage: Applies to eligible activities conducted internationally
• Competitive advantage: Reduces capital requirements versus self-funded competitors

What Will Recce Pharmaceuticals Use the R&D Rebate For?

Phase 3 Clinical Trial Funding (Indonesia)

The majority of rebate proceeds will directly fund Recce’s ongoing Phase 3 clinical trial for RECCE® 327, currently enrolling patients in Indonesia. The trial evaluates the intravenous synthetic polymer anti-infective in patients with serious bacterial infections, including bloodstream infections and sepsis caused by Gram-positive and Gram-negative bacteria.

RECCE® 327 holds FDA Qualified Infectious Disease Product (QIDP) designation under the Generating Antibiotic Initiatives Now (GAIN) Act, providing Fast Track development status and 10 years of market exclusivity post-approval. The World Health Organization has included R327 on its list of antibacterial products in clinical development for priority pathogens, recognising the candidate’s potential to address antimicrobial resistance.

Phase 3 trials represent the final pre-commercialisation clinical hurdle for drug candidates. Successful completion generates the pivotal efficacy and safety data required for regulatory approval submissions to agencies like the FDA and Therapeutic Goods Administration. This funding accelerates the pathway to potential market entry without necessitating additional capital raises during a critical development phase.

Domestic Clinical Programs and Pipeline Expansion

Beyond the Indonesian Phase 3 trial, rebate funds will support Recce’s broader three-candidate anti-infective pipeline and planned Australian clinical programmes. The company’s portfolio includes RECCE® 435 (R435), an orally administered therapy for bacterial infections, and RECCE® 529 (R529), targeting viral infections. All three candidates have been recognised by the WHO on its antibacterial products list.

Recce wholly owns its automated manufacturing capabilities, providing supply chain control and cost advantages as clinical programmes scale. The company aims to initiate domestic clinical studies across its pipeline candidates, with the R&D rebate funding preclinical work, manufacturing refinement, and regulatory preparation activities.

The multi-candidate strategy positions Recce to address bacterial infections across multiple administration routes while exploring viral applications, diversifying commercial opportunities beyond the lead R327 programme.

Recce’s Strategic Position in the Antimicrobial Resistance Market

Recce Pharmaceuticals’ synthetic polymer approach differentiates its candidates from traditional small-molecule antibiotics, which face increasing bacterial resistance. RECCE® 327 operates through multi-layered mechanisms of action designed to overcome the processes bacteria and viruses utilise to develop resistance – a current challenge facing existing antibiotics. The Pew Charitable Trusts’ Global New Antibiotics in Development Pipeline recognises R327 as the sole synthetic polymer and sepsis drug candidate currently in clinical development.

The FDA’s QIDP designation under the GAIN Act provides RECCE® 327 with 10 years of market exclusivity post-approval, extending beyond standard patent protections. This extended exclusivity period creates substantial barriers to competition and supports premium pricing strategies for novel anti-infectives addressing unmet medical needs. Fast Track designation additionally allows more frequent FDA interactions and potential for accelerated review.

The WHO’s inclusion of all three Recce candidates (R327, R435, R529) on its antibacterial products list for priority pathogens validates the company’s approach to combating antimicrobial resistance. This recognition positions Recce’s pipeline within a select group of developers addressing globally recognised superbugs that cause significant mortality and healthcare costs.

Key regulatory and market recognitions include:

• FDA QIDP designation with Fast Track status (R327)
• 10 years post-approval market exclusivity under GAIN Act
• WHO priority pathogen list inclusion (all three candidates)
• Pew Charitable Trusts pipeline recognition as sole synthetic polymer candidate
• Owned manufacturing capabilities supporting clinical supply and future commercialisation

Recce’s regulatory pathway advantages and unique mechanism of action create differentiated positioning within the antimicrobial resistance market. The combination of extended market exclusivity, streamlined regulatory interactions, and synthetic polymer technology addresses both clinical efficacy challenges and commercial viability concerns facing novel antibiotic development.

Looking Ahead: Cash Runway and Upcoming Milestones

The combined $8.3 million in potential FY25 R&D rebates (comprising $5.3 million received plus $3.0 million under ATO review) significantly strengthens Recce Pharmaceuticals’ financial position. This non-dilutive funding reduces near-term capital raising pressure, allowing management to concentrate on clinical execution and regulatory milestones rather than shareholder dilution.

The additional $3.0 million rebate remains subject to Australian Taxation Office review and approval, with timing dependent on ATO processing schedules. Based on historical patterns, companies typically receive supplementary R&D rebate instalments within several months of lodgement, though exact timelines vary. Once approved, these funds would complete Recce’s FY25 rebate entitlements.

CEO James Graham emphasised the company’s forward focus:

“We appreciate the Australian Government’s ongoing commitment to supporting innovation and R&D, and we look forward to delivering important milestones as we advance our new class of synthetic anti-infectives.”

Key upcoming catalysts for investors to monitor include:

1. Additional $3.0M rebate approval: ATO review completion and cash receipt timing
2. Phase 3 interim data: Potential efficacy or safety updates from the Indonesia trial
3. Domestic trial initiations: Commencement of planned Australian clinical programmes
4. Manufacturing scale-up: Capacity enhancements supporting clinical and commercial supply

The $8.3 million non-dilutive funding package materially de-risks Recce’s near-term capital requirements while maintaining shareholder equity positions. This financial buffer provides operational flexibility as the company progresses through critical late-stage development milestones that could determine R327’s commercial viability and broader pipeline advancement.

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